Coinbase Hit With US Lawsuit (Again), But Not From SEC
Coinbase just can't stay out of the courtroom. But this time, it's not the United States Securities and Exchange Commission (SEC) taking aim at the listed crypto exchange.
Plaintiffs from California and Florida have filed a lawsuit in the US District Court for the Northern District of California, San Francisco Division, against Coinbase for allegedly knowingly violating state securities laws through their digital asset sales.
Gerardo Aceves, Thomas Fan, Edwin Martinez, Tiffany Smoot, Edouard Cordi, and Brett Maggard are among the plaintiffs involved.
According to the lawsuit, tokens sold on Coinbase including Solana, Polygon, Near Protocol, Decentraland, Algorand, Uniswap, Tezos, and Stellar Lumens, should be classified as securities.
Coinbase had admitted to being a "Securities Broker" in its user agreement, the plaintiffs argued, implying that digital asset sales could fall under investment contracts.
Coinbase's Prime brokerage also functions in a similar fashion to a security broker, the lawsuit claims.
The plaintiffs are now seeking full rescission of these transactions, statutory damages under state laws, and injunctive relief through a jury trial.
Coinbase has disputed the claims, stating that the secondary sales of crypto do not meet the criteria for securities transactions.
This dispute is not the first time Coinbase has faced legal action in US courts. The SEC and Coinbase have long been at loggerheads, with the US regulator accusing the exchange of operating an unregistered platform that lists unregistered crypto securities.
Last year, the exchange was issued a Wells Notice by the SEC over some of its products. Coinbase said the Wells Notice is in regards to "an undefined portion of our listed digital assets, our staking service Coinbase Earn, Coinbase Prime, and Coinbase Wallet."
A Wells Notice informs the company that SEC staff have recommended that the SEC should take enforcement action for security law violation, but is not a formal charge, nor does it necessarily mean a charge will be carried out.
Coinbase has barked back too. In March this year, Coinbase launched a legal challenge against the SEC. The action stems from the SEC's December rejection of Coinbase's formal petition for rulemaking. This petition sought to clarify the regulatory framework governing the crypto industry, a request that Coinbase contends was dismissed without sufficient explanation or justification.
The exchange accuses the SEC of overstepping its authority by applying traditional securities law to crypto assets without adapting its regulations to the unique characteristics of these digital assets.